The process of separating an employee from a company must be clearly set out and planned in advance. We recommend developing a separation checklist so that all of the company’s policies are followed, as well as any applicable laws that pertain to the employer and their industry. This article provides five issues employers should consider in developing a separation checklist for their company:
1. Documenting reason for termination
Employers should establish a protocol for documenting the reason for termination. Some considerations for documenting could include the following:
- Is there a company policy that was violated? Is this policy in writing? Has it been distributed to the employee, and has the employee signed an acknowledgment of the policy?
- Who was involved in the termination decision?
- Review reasons for termination, and have clear guidelines for seeking legal counsel to avoid any potential wrongful termination or discrimination claims.
2. Final paycheck amounts and timing requirements
An employee who is discharged must be paid all of his or her wages, including accrued vacation, immediately at the time of termination. Ensure that the final paycheck will be available to the employee on a timely basis (see below for timing requirements). If an employee had direct deposit, an employee must re-authorize direct deposit for a final paycheck, and this should be documented. In Canales v. Wells Fargo, N.A., (2018) the court held that employers are not required to provide final wage statements (pay stubs) at the same time as the final check, but instead have until the semimonthly deadline set forth in Labor Code section 226(a).
California law requires the employer comply with the following deadlines for providing final paychecks:
- An employee who is discharged must be paid all of his or her wages, including accrued vacation, immediately at the time of termination. This does not mean that the company cuts the check and mails it to the employee, the check must be provided to the employee at the time of termination.
- An employee who gives at least 72 hours prior notice of quitting, and quits on the day given in the notice, must be paid all earned wages, including accrued vacation, at the time of quitting.
- An employee who quits without giving 72 hours prior notice must be paid all wages, including accrued vacation, within 72 hours of quitting.
- An employee who quits without giving 72-hours notice can request their final wage payment be mailed to them. The date of mailing is considered the date of payment for purposes of the requirement to provide payment within 72 hours of the notice of quitting.
Final wage payments for employees who are terminated (or laid off) must be made at the place of termination. For employees who quit without giving 72 hours notice and do not request their final wages be mailed to them, the location is at the office of the employer within the county in which the work was performed.
3. Compile list of documents to provide to separating employees
California law requires employers to provide certain documents to employees upon their separation from employment. Here is a list of some of the common forms often required to be provided to employees:
- Notice to Employee as to Change in Relationship (required under California Unemployment Insurance Code 1089)
- For Your Benefit, California’s Program for the Unemployed (published by the EDD)
- COBRA and Cal-COBRA notices (can be obtained from health insurance provider)
- Health Insurance Premium (HIPP) Notice (for employers with 20 or more employees, the Department of Health Care Services requires this form)
Employers should take time to review their obligations and forms that are required for their particular industry or situation.
4. Establishing protocol for references and disclosing why the employee left the company within the company
Employers often establish that it will only confirm the title and dates of employment for former employees, and, if authorized by the former employee, the former employee’s final pay rate. Employers do this to avoid potential claims for misrepresentation, violation of privacy, and defamation. Also, employers need to be careful about disclosing the reason for an employee departure within the company, as that may violate the former employee’s privacy rights. Employers should remind employees and management not to disclose this information to people in the company that do not have a reason to know, and remind employees about who any requests for references should be directed to within the company.
5. Evaluate whether a severance agreement would be appropriate
Under California law, the obligation to provide severance to a departing employee is not required. However, employers can offer severance to employees for numerous reasons:
- during a layoff the employer wants to provide something to the employees for their recognized service,
- the company entered into a contract with an executive to provide severance if certain conditions were met, or
- the separation is high risk and there is potential litigation between the parties and the employer wishes to obtain a release of claims to prevent future litigation.
If an employer offers severance payment to a departing employee, they should always have the severance agreement reviewed by an employment attorney to ensure that it contains a broad release of claims so that the employee cannot initiate litigation against the company for claims that arose during their employment. My previous article discussed in more detail issues about severance and severance agreements.